20201030-招银国际-药明康德-603259.SH-Accelerated_growth_in_3Q20_driven_by_strong_performance_in_CDMO_and_China-base_lab_service_4页_706kb

WuXi AppTec (603259 CH) Summary

Core Content

WuXi AppTec reported strong financial performance in the third quarter of 2020 (3Q20), with revenue reaching RMB4.58bn, a 35.4% YoY increase. Non-IFRS net profit rose by 44.3% YoY to RMB958mn, while attributable net profit decreased by 8.1% YoY to RMB651mn due to foreign exchange losses. The company's performance in 3Q20 outpaced the first half of 2020, where China-based laboratory services, CDMO services, US-based laboratory services, and Clinical research & other CRO services showed revenue growth of 38.9%, 54.9%, -13.5%, and 16.8% YoY, respectively.

Main Growth Drivers

• CDMO and China-based lab services were the primary growth drivers, with YoY revenue growth of 54.9% and 38.9% in 3Q20, and 36.5% and 30.9% in the first nine months of 2020 (9M20).
• The company added 440 new molecules to its CDMO pipeline year-to-date (YTD), and its total CDMO pipeline now includes over 1,100 active projects, with 26 commercialized projects and 42 Phase III projects.
• WuXi AppTec submitted IND filings for 18 new chemical entities (NCE) and obtained 20 CTAs in China, with a cumulative total of 103 NCE IND filings and 77 CTAs, including 1 Phase III, 9 Phase II, and 56 Phase I clinical trials.

Globalization Strategy

• WuXi AppTec expanded its customer base, adding over 900 new customers and serving more than 4,100 active customers, including all the top 20 global pharmaceutical companies.
• In 9M20, overseas customers contributed 76.4% of total revenue, while China customers accounted for 23.6%, with YoY growth of 25.3% and 34.4%, respectively.
• The "long-tail" strategy helped generate 67.2% of total revenue in 9M20, with a YoY increase of 28.4%.

Investment and Valuation

• CMB International Securities raised its target price (TP) from RMB131.98 to RMB139.05, reflecting a strong long-term growth outlook for WuXi AppTec.
• The company's adjusted Non-IFRS attributable net profit is forecasted to grow by 35% / 33% / 32% YoY in FY20E/21E/22E, and attributable net profit is expected to increase by 85% / 22% / 32% YoY.
• WuXi AppTec maintains a diversified investment portfolio, which is expected to bring significant investment gains over the long term.

Financial Performance Overview

SOTP Valuation

Analyst Ratings

• BUY: Stock with potential return of over 15% over the next 12 months.
• HOLD: Stock with potential return of +15% to -10% over the next 12 months.
• SELL: Stock with potential loss of over 10% over the next 12 months.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark over the next 12 months.

Market and Financial Highlights

• Market Cap: RMB273,533 mn
• Average 3-month turnover: RMB1,491.47 mn
• 52-week high/low: RMB118.5 / RMB60.2
• Total issued shares: 2,135 mn

Shareholding Structure

Share Performance

Key Ratios

Analyst Certification

The research analyst certifies that the views expressed in this report accurately reflect his or her personal views about the subject securities or issuer and that no part of his or her compensation was directly or indirectly related to the specific views expressed in this report.

Risk and Disclaimer

There are risks involved in transacting in any securities. The information contained in this report may not be suitable for all investors. CMBIS does not provide individually tailored investment advice. Past performance has no indication of future performance, and actual events may differ materially from those contained in the report. The value of and returns from any investments are uncertain and may fluctuate based on underlying assets or other variable market factors.

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